1

International Framework for Nuclear Energy Cooperation:

Outcome of the 2012 IFNEC Finance Workshop

Dr. Alex R. Burkart Co-Chair

Infrastructure Development Working Group

IAEA Technical Meeting on Topical Issues on Infrastructure Development:

Nuclear Power Project Development in Emerging Nuclear Power States

Vienna, 11-14 February 2013

2

IFNEC Statement of Mission

“The International Framework for Nuclear Energy Cooperation provides a forum for cooperation among participating states to explore mutually beneficial approaches to ensure the use of nuclear energy for peaceful purposes proceeds in a manner that is efficient and meets the highest standards of safety, security and non-proliferation. Participating states would not give up any rights and voluntarily engage to share the effort and

gain the benefits of economical, peaceful nuclear energy.”

3 3

Participants Observer Organizations Observer Countries

1. Argentina 22. Netherlands 1. International Atomic 1. Algeria 22. Slovakia

2. Armenia 23. Oman Energy Agency (IAEA) 2. Bangladesh 23. South Africa

3. Australia 24. Poland 2. Generation IV 3.Belgium 24. Spain

4. Bahrain 25. Romania International Forum (GIF) 4. Brazil 25. Switzerland

5. Bulgaria 26. Russia 3. Euratom 5. Chile 26. Sweden

6. Canada 27. Senegal 6. Czech Republic 27. Tanzania

7. China 28. Slovenia 7. Egypt 28. Tunisia

8. Estonia 29. Ukraine 8. Finland 29. Turkey

9. France 30. U.A.E. 9. Georgia 30. Uganda

10. Germany 31. U.K. 10. Greece 31. Vietnam

11.Ghana 32. U.S. 11. Indonesia

12. Hungary 12. Latvia

13. Italy 13. Malaysia

14. Japan 14. Mexico

15. Jordan 15. Moldova

16. Kazakhstan 16. Mongolia

17. Kenya 17. Nigeria

18. Republic of Korea 18. Philippines

19. Kuwait 19. Qatar

20. Lithuania 20. Saudi Arabia

21. Morocco 21. Singapore

IFNEC Membership

63 Countries and 3 International Organizations

4

Participant Countries Observer Countries

Observer Organizations: IAEA, Euratom, GIF

IFNEC Membership

5

•

•

Lancaster House London, United Kingdom

May 9-10, 2012

6

Workshop Background

Financing raised at 2010 Executive Committee meeting in Jordan, discussed as the greatest challenge facing global nuclear development

At the 2011 Poland Ministerial, the Executive Committee directed the Steering Group to hold an expert-based stakeholder workshop

Workshop Goals: • To gain a stronger understanding of the roles, challenges and

opportunities associated with the financing of nuclear power projects;

• To create a forum in which major stakeholders are able to discuss these matters; and

• To identify specific actions IFNEC countries could consider taking, collectively or individually.

2

7

Workshop Challenge

3 Main Workshop Components

Scene Setting Session

Workshop Challenge

To gain a stronger understanding of the challenges and opportunities associated with the financing of nuclear power projects

To create a forum in which major stakeholders were able to discuss these matters

To identify specific actions IFNEC countries could consider, individually or collectively.

Hypothetical Scenario Sessions

Breakout Discussion Sessions

1

2

3

130 Stakeholder Representatives • Commercial banks • Rating agencies • Insurance Agencies • Utilities • Reactor vendors/suppliers • Energy planning authorities

8

Industry Engagement at the Workshop • Allen & Overy LLP • ALSTOM • AREVA • Atkins Global • AVDA Consult Ltd • Bank of Tokyo-Mitsubishi UFJ Ltd • Barclays • Blenheim Capital • BNP Paribas • Bulgarian Energy Holding EAD • Candu Energy, Inc. • China Power Investment Company • Citigroup Global Markets, Inc. • Coface • Deloitte • Delta NV • EDF • Emirates Nuclear Energy Corporation • EnergoNuclear (Romania) • GE Hitachi Nuclear Energy • Global Vision 2000 • Hitachi-GE Nuclear Energy Ltd. • HSBC • Japan Bank for International Cooperation • Kozloduy NPP Plc. • KPMG • Lithuanian Electricity Organization • Magyar Villamos Muvek Zrt. • Marsh Limited

• Metsamor EnergoAtom CJSC • Milbank, Tweed, Hadley & McCloy LLP • Mitsubishi Heavy Industry • Mizuho Corporate Bank Ltd. • Moelis & Company • Moody’s Investors Services • Natixis • NERA Economic Consulting • Nippon Export and Investment Insurance • Norton Rose LLP • Nuclearelectrica SA • UK Nuclear Industry Association • Northcourt • Nugeneration, Ltd. • PGE Energia Jadrowa S.A. • Pillsbury Law • PricewaterhouseCoopers • Prospect Law Ltd. • Royal Bank of Scotland • Shaw Power Group • SP Intl • Société Générale • Sogin • Standard & Poors • Sumitomo Mitsui Banking Corp. - Europe Ltd • Toshiba Corporation • TVO • U.S. Export-Import Bank • Westinghouse • World Bank

60 companies attended, 50 for the first time at an IFNEC event.

9

Nuclear Finance Basics: General discussion of nuclear financing to facilitate collaborative Workshop participation

Stakeholder Perspectives: Individual stakeholder perspectives on nuclear project financing approaches and issues • Finance/Commercial Banking: • Insurance • Export Credit Agency • Utility

Country Perspectives: Financing experiences and challenges from countries with varying degrees of nuclear experience • Jordan • China • Poland • Finland

Scene Setting Session

Objective: Provide foundational knowledge on nuclear financing to the participants.

10

Hypothetical Scenarios: Expanding and Emerging Nuclear Country

Expert Panelists:

•Utility

•Rating Agency

•Insurance

•Technology Vendor

•Bank

•Legal Consultant

•Technical Consultant

•Regulator

•Market Consultant

•Energy Planning Authority

•Export Credit Agency

Objective: Expert panelists representing key stakeholders discuss a hypothetical proposal to expand an established nuclear power program or establish an emerging nuclear power program in order to clarify stakeholder perspectives and identify challenges and opportunities related to financing this proposal.

The moderator focuses on getting the interests of each party “on the table.”

11

Role of Government Funding for Infrastructure versus Financing of Nuclear Project

Technology Choices and Risk

Role of Regulation (Nuclear Liability, Safety, Market, Environmental, Non-proliferation) in Supporting the Civil Nuclear Industry

Partnerships to Support Nuclear Development

Energy Market Considerations (Merchant Market, Regulated Market, Power Purchase Agreement, etc.)

Importance of a Fuel Back-end Plan

Breakout Sessions

Objective: Review lessons learned from the scenario exercise, identify the challenges encountered, discuss one specific topic in more depth, and offer opportunities to overcome identified challenges, including what IFNEC countries can do individually and/or collectively.

12

Key Findings

Key Findings from Workshop

• An effective, independent regulatory body that is open and transparent is extremely important to the financial community when determining whether or not to lend, the rate at which the lending would be provided, the readiness of investors to invest and risk premiums.

• The regulator increases assurance that the project can be confidently developed in compliance with all safety-based requirements and with effective independent oversight that is directly responsible to the public.

• The depth of commitment and host country support is the starting point for project evaluation by the financial community.

• Commitment of the host country will be evident in the rationale as to why a nuclear project is being proposed rather than other available energy options.

• Without visible and consistent backing of the host government, it is unlikely that the interest and confidence needed in the project from the investor and financial community will develop.

• Long-term government support backing its commitment is essential for any project to go forward as planned.

• There is a need for a clear overall business plan that underpins and helps bound the project.

• The ability to finance a NPP will depend to a large extent on the quality of the project plan that has been developed.

• The scope and content of the plan will demonstrate the extent to which critical issues have been identified and are being managed.

• Broad stakeholder involvement early in the planning process is crucial to project success.

Importance of an Effective, Independent Regulatory

Body

Essential Role of Government Commitment

and Support

Need for a Sound Business/Project Plan

13

Importance of an Effective, Independent Regulatory Body

7

The sharing of best practices related to the organization and operation of independent regulatory agencies is essential to facilitate the development of strong, independent regulators internationally.

Cooperative regulation may enable emerging countries to benefit from the activities of other countries in conducting their regulatory activity.

A follow-on regulatory workshop would be beneficial to continue information sharing.

Adequate interaction among the various regulatory entities – e.g., safety, environmental and economic, construction code development – would positively impact the construction and operation of a nuclear power plant.

14

Essential Role of Government Commitment

and Support

8

There needs to be a framework that conveys the integrity of the government’s decision and the depth of support for the decision to build a NPP.

The awareness and acceptance of international treaties, in particular those related to safety and nuclear liability, is not yet global.

Infrastructure development, including human resources (training and development of potential workforce) as well as electricity-related infrastructure, must occur before NPP development.

Governments enable the environment for the potential lenders to finance NPPs by facilitating communications with potential lenders such as ECAs and other lending institutions.

15

Need for a Sound Business/Project Plan

9

A comprehensive and interactive stakeholder participation process that incorporates lessons learned and best practices is essential for a strong NPP business case.

There is not currently a comprehensive catalog and analysis of nuclear finance options that is benchmarked against options/tools used by other industries (airline, oil and gas, information technology).

The critical elements of a successful NPP business case must be established, including the development, operation and decommissioning phases and the long-term waste management options of the nuclear power project, in order to demonstrate that the business risks have been anticipated, identified, and addressed adequately.

New NPPs should learn from recent NPP case studies including discussions related to financing of proposed and historical nuclear power plants.

Alternative financing/refinancing NPP options have yet to be fully explored including phased financing/refinancing of NPPs, separate financing of the NPP and the related infrastructure and other models.

There are many issues and opportunities associated with regional projects that can be explored.

16

Go

vern

me

nt

Sup

po

rt

Ind

ep

en

de

nt

Re

gula

tor

Proposed Actions for IFNEC Countries, Individually or Collectively

• Follow-On Regulatory Workshop

• Promote Awareness and Acceptance of International Treaties – Safety & Liability

• Support Infrastructure Development

• Share Best Practices – Industry and Government

• Examine Cooperative Regulation • Interaction Among Regulatory

Entities • Follow-On Regulatory Workshop

• Transparent Framework to Convey

Government Policy Support for NPP • Promote Awareness and Acceptance

of International Treaties – Safety & Liability

• Develop NPP Financial Lending Environment

• Support Infrastructure Development

• Develop a Business Case that Demonstrates Net Benefit

• Catalog and Benchmark NPP Finance Options

• Develop and Implement Stakeholder Participation Process

• Establish a Forum on New NPP Case Studies

• Explore Alternative Finance Options • Evaluate Issues & Opportunities of

Regional Projects/Strategic Partners

• Share Best Practices – Industry and Government

• Examine Cooperative Regulation

• Transparent Framework to Convey Government Policy Support for NPP

• Promote Awareness and Acceptance of International Treaties – Safety & Liability

• Develop NPP Financial Lending Environment

• Support Infrastructure Development

• Develop and Implement Stakeholder Participation Process

IFNEC Consideration

National Issues

Best Practices

Sou

nd

Bu

sin

ess

P

lan

17

Conclusions from IFNEC Finance Workshop

Stakeholder-wide approach was critical for IFNEC.

• Transparent and complete communication across all stakeholders very early in the planning process is essential for securing the confidence of the financial community.

Understanding risk and risk management/mitigation mechanisms is necessary.

• Fully understanding the risks before, during and after the operation of a nuclear power project is especially critical.

The role of government is important in all aspects of financing.

• IFNEC is an excellent forum for leveraging resources/sharing information.

… Markets can manage known risks, but not

uncertainties…

18

Next Steps

The IFNEC Executive Committee met on October 10, 2012 in Morocco and agreed: • To accept the key findings of the 2012 Finance Workshop. • That a number of proposed actions that arose from Workshop

discussions are actions IFNEC Participant countries may consider taking, individually or collectively.

• That private and government stakeholder-wide collaboration provides added value to the discussions.

Download the Final Summary Report at:

www.ifnec.org/docs/Appendicies/IFNEC_Finance_Workshop_ Final_Summary_Report_-_October_4_2012.pdf

The IFNEC Executive Committee directed its Steering Group to continue discussions of these issues in close cooperation with the IAEA, including discussion between the regulatory community and the financial community.

It is expected that a follow-on Workshop will be convened in 2013. Results reported at 2013 Executive Committee Meeting in the UAE